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Five Publishers Set to Start Building Digital Storefront for Print

But Many Details Still to Be Worked Out, Including the Technology

NEW YORK (AdAge.com) -- Five of print's biggest competitors are about to place a collective wager on their best path forward in digital media, announcing as soon as Monday their joint venture to build a digital storefront, settle on common standards and systems for digital editions, and work together to finally wring real money from readers and advertisers' digital pursuits.

A mockup of Apple's anticipated tablet - just one of the devices the storefront will need to consider in its plans.

But the bet -- an LLC being formed by Time Inc., News Corp., Hearst, Conde Nast and Meredith, those involved confirmed this week -- will emerge, at first at least, as essentially a promise to figure out more bets. "It's an agreement to agree on future developments," as one publishing executive put it this week.

The five partners are in a room together because digital media has proved so difficult to master -- and, in particular, because Amazon's Kindle so forcefully demonstrated both the promise and the peril ahead. Amazon alienated many publishers by taking a stiff 70% cut of Kindle Store revenue and hoarding all the information about customers. Publishers desperately want to control their relationships with readers, send those readers appropriate special offers, and use their information about readers to command higher rates from advertisers.

"It makes a lot of sense for publishers to come together and have one voice when talking to device manufacturers, ad agencies, clients and promoting this platform," the publishing executive said.

But the new partners, initially led on an interim basis by Time Inc. Exec VP John Squires, still haven't settled most of the key questions. Details still to be figured out include the business plan, who to hire as CEO, which technologies to adopt, what consumer brand name to bring to market, the contours of the consumer experience, and how aggressively to market itself. The founding members are all paying an initial ante, but the necessary further investments again remain to be determined.

"Now that this transition is under way, the big thing is to figure out what is going to work for consumers, how you make the best offerings and get them out there, and underneath that how it is delivered," another executive said.

Those questions won't be simple to answer. Witness the early jockeying around technology platforms, including some products and systems that for now are only vapor. Hearst's Skiff subsidiary, formerly FirstPaper, today said it plans to introduce an e-reading platform next year. Time Inc. this week revealed a demo of an unfinished, souped-up digital version of Sports Illustrated, built by The Wonderfactory, and intended for tablet computers that don't exist yet. And last month Conde Nast announced an alliance with Adobe, and talks with Hewlett-Packard, to build digital magazine applications.

The participating publishers will also need to decide how much to invest in marketing their new offering. A place where you can buy souped-up digital versions of print products may not have the same automatic appeal as Hulu, where you can watch TV shows on demand for free.

"The question is how far it goes down a line to being an offer as opposed to a marketer," said an executive involved. "'Storefront' means people can come there and get what they want. 'Marketer' means you're going to invest to create a consumer proposition and get that out there in a very active way. It can't know that yet."

The demo version of a tablet-ized Sports Illustrated looked very cool this week, moreover, but it will be a while before that gets beamed into tablets the way books get wirelessly downloaded to Kindles. "What it takes to do that right now does not exist in the market," the executive added. "You've got to figure out the delivery system. Either you need a lot of bandwidth or you've got to plug it into your computer. Are you going to launch with a different creative execution or wait?"

The storefront will start life, in all likelihood, without a killer device on the market for which it can sell killer apps. At the outset it will probably be dominated by content for smartphones, e-readers and, if newspapers get those promised pay walls in place, paid content on the internet.

Each partner will have different assets to offer the venture -- and sometimes different priorities too. News Corp. brings a lot to the venture, starting with newspapers -- making the storefront a much more robust offering than one devoted to magazines alone. Neither Hearst Corp.'s newspaper portfolio nor the newspapers owned by Conde parent Advance Communications are expected to take an active role at the outset. News Corp. also has years of experience managing digital subscriptions at The Wall Street Journal. And it is intent on raising pay walls around other newspaper sites in its portfolio.

One of the founding magazine partners, on the other hand, emphasized that the storefront will probably not just truck in digital: It's going to sell print editions too.